Renting Biodiversity: The Conservation Concessions Approach

With all the money we spend making conservation pay for itself, we could just pay for conservation.

By Katherine Ellison

Jared Hardner felt more than slightly anxious as he followed the skinny man beckoning to him from a hut along a dangling catwalk. The Palo Alto, California, consultant had traveled two days by fishing boat to this village on Indonesia’s Togean islands, where “sea-gypsies” build homes on stilts above the water, and where outlaw fishermen dynamite the extraordinary local reefs to boost their catch. Hardner didn’t speak the language, and he knew he stood out—maybe dangerously so—as a 6’2” American with a buzz-cut in the world’s largest predominantly Muslim nation.

Not wanting to seem unfriendly, however, Hardner ducked into the dark hut, as his host, to his increasing unease, bolted the door behind him. The man then turned to pull up a floorboard, unveiling a netted holding pen where dozens of groupers and Napolean wrasse, swam in crystal blue water. Hardner’s host had naturally assumed his guest wanted to check out his black-market ware.

In fact, Hardner had another sort of business deal in mind, so odd and ambitious that the sea gypsy quite reasonably might never have imagined it. His goal on the picturesque islands was to rent land—not to exploit it, but to save it—with a radical and increasingly popular new tool known as a “conservation concession.”

The 33-year-old Yale-trained economist represents a new breed of environmentalist: a tropical real estate broker, shuttling from the Sulawesi Sea to Peru’s Andes peaks in his efforts to close deals between philanthropic donors and the owners of biologically rich land. He and Dick Rice, a senior economist with Conservation International (CI), are working to create a global market in direct payments for conservation—a kind of market in biodiversity—by leasing development rights, or concessions, from governments and other landowners.

Conservation concessions are management contracts between a government or community landowner and a conservation-minded buyer. They offer a novel way for green activists to compete directly with timber firms seeking to lease rights to land. Unlike a park, a concession reaps revenues, making it much more appealing to host governments. And unlike a park, or an easement, which can lock up land forever, a concession is temporary, albeit renewable.

The tactic of buying such concessions represents a stark departure from past practices in tropical lands, where rich-country NGOs first tried to persuade poor-country landowners to protect nature on moral grounds and then engineered “sustainable” development projects, most of which have yet to produce profits. Hardner and Rice dub these efforts “indirect,” compared to their strategy’s blunt linkage of payments and environmental protection. At a time of growing impatience with the slower methods’ failure to stall an alarming rate of environmental degradation, their “warp-speed” approach, as Rice describes it, has won some powerful advocates. The noted biologist E.O. Wilson, in a column titled “The Solution” in this magazine last year, called conservation concessions part of a “true revolution in global conservation.”

Like many revolutions, however, this one to date looks better on paper than it does in the real world. Concessions, as Rice and Hardner envision them, “are still kind of a virtual thing,” Rice concedes. The fruit of their efforts over the past four years amounts to two major projects just getting off the ground in Peru and Guyana and two significant nonstarters, in Guatemala and Cameroon. There are also two similar experiments by other conservation groups in Mexico with a mixed record of success.

Undeterred by the bumps in their short track record, the concessions champions maintain there’s huge potential to move forward—and potentially enough money available to protect the world’s most endangered areas with a combination of parks and concessions. It’s just this ambition, however, that stirs the most concern among critics who worry the approach is being oversold.

The Conservation Profit Margin

The idea of making a concerted effort to protect biodiversity by leasing concessions was born in a conversation between Hardner, Rice, and a Guyanese forest commissioner, circa 1999. In the midst of discussing how to protect a half-million hectare forest, either Hardner or Rice—each claims they were both thinking it, but can’t remember who actually said it—suggested, jokingly, that they buy the timber rights to the land, just as a logging company might do. The commissioner, to their surprise, welcomed the offer, and negotiations began.

Hardner and Rice were already known as critics of the notion that forests can be saved by “sustainable” management. They’d grown convinced that market-based projects, in which residents of threatened lands try simultaneously to care for nature and profitably produce timber, coffee, and other products, had neither saved much biodiversity nor provided reasonable local incomes. “With all the money we spend trying to make conservation pay for itself, we could pay for conservation,” argues Hardner.

There is indeed no doubt that conservation financiers in recent years have evolved into a powerful force—a US$2-billion annual force, according to Hardner. He calculates that governments and development banks alone spend half a billion dollars yearly to protect land, with private foundations and environmental groups throughout the world contributing an additional US$1.5 billion. (The Nature Conservancy alone spends close to US$1 billion a year on buying and managing land to conserve, making this estimate most likely conservative.) U.S. tax laws require philanthropies, including the Gordon and Betty Moore Foundation and the David and Lucile Packard Foundation, both of which have a strong interest in conservation, to give away 5 percent of their assets every year. Even despite its recent stock-market losses, the Packard Foundation budgeted US$46 million for conservation and science last year. The Moore Foundation, meanwhile, has created a US$100-million Global Conservation Fund, dedicated exclusively to the creation of new protected areas and expansion of existing protected areas. Its budget is US$5 million a year for five years, plus US$75 million to the extent it can be matched. In this context, Hardner says, most concessions go for “chicken feed.”

One reason for this is that as conservation funders have acquired more clout, their competitors, chiefly the logging industry, have suffered a decline. The price of timber, together with other commodities, has stayed mostly flat over the past couple of decades, with little hope for improvement, as supplies have increased from plantations and newly exploited forests. Meanwhile, increasing government regulations in tropical countries have made the business more costly. The result is that well funded NGOs can often outbid cash-strapped timber firms for resource rights.

Hardner calculates the cost of protecting land in the tropics at between US$10 and US$100 per hectare. Given his US$2-billion estimate of available conservation funds, he says, “it would be possible to create endowments that could permanently protect 20-200 million additional hectares per year,” eventually covering the “hot spots,” the 1.4 percent of the Earth’s land that Conservation International has pinpointed as the most biologically rich and most threatened.

Buying land outright in developing countries isn’t a sound option, what with nationalists having long decried foreign efforts to turn their homes into “tree museums.” Yet Hardner and Rice say they’ve found many governments willing to consider long-term, renewable leases. A built-in advantage is that such deals can be structured to include regular monitoring for conservation progress, with lease payments potentially withheld if conservation efforts cease. This is the logic behind the two projects underway in the deep forests of Peru and Guyana. “It’s quid pro quo,” says Rice, adding, “The rest of the world’s economy rests on this model, so there’s no reason it can’t be used for conservation.”

Test-Driving Concessions

Peru was the first nation to sell a conservation concession, beating the Guyanese to the punch in July of 2001. While the Guyanese were still negotiating, Peru’s government was so willing that it specifically allowed conservation concessions in its new Forestry and Wildlife Law, passed in 2000. In a departure from Latin America’s tradition of nationalist wariness, Peru’s officials even worked with U.S. conservation experts, including Hardner, who helped craft the legislation.

The concessions established in Peru and, one year later, Guyana, were both “turn-key” arrangements. Designed by Hardner and his consulting partner, Canadian ecologist Ted Gullison (in the case of Peru) and Hardner and Rice (in Guyana), the concessions were then handed over to the new owners: the Amazon Conservation Association, a nonprofit NGO incorporated in the United States and Peru, and Conservation International’s office in Guyana. These two groups have since then been in charge of both management and monitoring.

Hardner and Rice picked the two sites to “test-drive” their model for several reasons, but the common bottom line was that both offered exceptional odds for success. Both are in remote and all but unpopulated areas, and in neither case did the conservationists face competitors for their bids.

In Peru, the land in question is a 135,000-hectare forest in the Los Amigos watershed, in Madre de Dios province, adjacent to a national park. It is all but unpopulated, except for the reported presence of itinerant indigenous groups, and although it has been logged in recent years, it still provides some nearly pristine habitat for an unusual diversity of bird and monkey species, according to Cristian Vallejos, executive director of the Amazon Conservation Association.

The NGO lobbied strongly for a conservation concession on the Los Amigos site because it was already developing a research facility on property it owns outside the concession boundaries. It has since agreed to invest US$5 million in infrastructure, salaries, and conservation management expenses over the first five years. Of that, Vallejos said, the Moore Foundation has contributed US$3.5 million, and the rest has yet to be raised. The sum will include wages for Peruvian employees of the research facility and scholarships for Peruvian students, in addition to costs of managing the conservation area. It will also create a US$1-million endowment to pay salaries for 11 rangers over the term of the contract.

Vallejos says it’s still too soon to say whether the concession strategy is working, yet he acknowledges there’ve been some unexpected problems. Loggers, having already removed the most valuable timber, are no longer cutting trees yet are still entering the area to illegally hunt tapirs and peccaries. The rangers hired under the terms of the concession have no power to arrest them, and local police haven’t responded as promptly as the concession owners had hoped. Thus, in a small change of plans, the NGO has recently begun using some of its concession investment funds to hold special workshops for local police to train them for their jobs.

In southern Guyana, a second conservation concession got off the ground in July of 2002, when Conservation International signed an agreement with the Guyanese government to lease timber rights to 80,000 hectares of pristine rainforest alongside the Essequibo River.

Retired Major Gen. Joe Singh, executive director of CI’s Guyana office, says the site wasn’t facing any immediate threats from loggers but that such threats were bound to increase as neighboring Brazil, 50 km away as the crow flies, continued to build roads improving access to the region.

The project has cost US$200,000 in its first year, including startup costs such as a US$46,000 timber inventory and US$30,000 for training of rangers. It also includes a US$10,000/year renewable “voluntary fund” to pay for assistance, such as sustainable farming technology and instruction and possible ecotourist projects, to people living outside the concession, according to Singh. Clearly, however, local job-creation isn’t a high point of the Guyanese concession. Just six residents in local communities have gotten fulltime jobs, as rangers and boat men. Finally, CI will pay US$41,000 in government fees. This is what a timber company would have had to pay to lease the management rights, Rice says, even though no firm had bid for that purpose. He says this money will go to the government’s normally underfunded forestry department and be used to help monitor “real” timber concessions.

In both Guyana and Peru, the conservation concessions have added immediate value to land that was virtually unproductive and not immediately desirable. The situation was quite different in Guatemala, however, where CI attempted to buy annual logging production from local communities on 75,000 hectares in the Maya Biosphere of the northern Petén—on the agreement that they leave the trees standing. Their efforts were defeated amid intense opposition last year.

There, for the first time, Hardner and Rice were trying to operate a concession in the face of well organized competition for the resources. They were dealing with two local communities, which held timber concessions granted to them by the government. The communities were willing to lease the concessions to a local NGO, funded by Conservation International, that would pay salaries for conservation managers, invest in tourism projects, and provide community services as compensation for lost logging revenues. But then local logging firms joined with NGOs committed to “sustainable” timber harvests to protest the deal.

“Selective logging has been working well in that area,” says Ohio State University environmental economist Doug Southgate, who co-wrote an editorial for Knight-Ridder Newspapers protesting CI’s effort. “Over the past three to five years, I’ve seen incomes go up, while deforestation and fires have decreased.”

Amidst the complaints, the head of the government’s forestry regulatory agency withheld his approval until CI lost interest in funding the project. Today, Hardner says, both the government and the communities are willing to proceed with the concession. But CI won’t be putting up the money.

Rice says he now believes the technical assistance “lavished on the region” over the past few years by groups including the U.S. Agency for International Development created “organized supporters of the status quo, which became an effective lobby to keep us out. We lost a lot of momentum, and I’m not convinced the opposition has gone away.”

Although discouraged in Guatemala, Hardner and Rice have been buoyed by new interest in their businesslike approach from none other than big business, specifically mining and oil firms enticed into the conservation market with hopes of improving community relations. In recent months, they have been designing a concession-type project for Antamina, one of the world’s largest copper and zinc mining operations, now in its second year of business in Peru. The company, under Canadian, Australian, and Japanese ownership, has already faced scattered protests by residents fearing pollution. The concessions plan would aim to win support by restoring an Andes mountain forest corridor and improving bird habitat while also providing erosion control and a source of wood for fuel.

To be sure, it’s unclear how much good will Antamina or any other firm can gain with such projects. “It’s still greenwashing to say we’ll set aside one piece of land and destroy another,” says Diana Ruiz of Project Underground, a U.S. NGO that tracks the mining industry. Hardner remains hopeful, however. Multinationals, as he notes, represent a huge amount of potential support for conservation projects and operate in many of the world’s “hot spots.”

As news of the proposed Antamina deal has spread, Hardner says he has recently received inquiries from three other big firms in Peru, two in mining and one in oil, and has also begun talks with a major law firm in Houston representing several of the world’s largest energy firms. He has been on the road in pursuit of these deals about two weeks of every month, remaining zealous despite some personal toll. On returning from Indonesia last spring, for instance, he came down with what his doctors say was SARS. On his recovery, the ever-entrepreneurial Hardner joked that now that he’s immune, he can start outsourcing trips to Asia.

Something Slower than Warp Speed

When Hardner and Rice are asked what they’ve learned from their four years of dealing with concessions, the theme seems to be: Full speed ahead!

“We’re awash in opportunities that only need to be taken advantage of,” says Rice, who cites in particular a potential partnership with The Nature Conservancy to protect a watershed above Quito, Ecuador. Undeterred by their experience in Guatemala, he and Hardner say they intend to continue to try out their mechanism in more diverse circumstances, in the faith that their eventual success will tame critics. “I haven’t seen any situation where the local community is not excited by this approach,” says Hardner.

Others are less sanguine. In critics’ eyes, the failure in Guatemala was less of a sui generis case than Rice and Hardner portray it and more a harbinger of potential problems with broad application of the concessions tactic.

“Concessions work well in places like Guyana, where the opportunity cost of land is low, and you’re not trying to push away anything else,” warns Stefano Pagiola, a senior environmental economist for the World Bank. “But in many places, competition from other uses is likely to be quite high. So basically you could get a large amount of not-threatened land or a small amount of threatened land. How do you define success?”

Rice calls that line of reasoning “silly.” “It’s like saying markets only operate where values are low,” he says. “Markets work for low-value commodities and extremely high-value commodities. All we’re talking about here are agreements between willing buyers and willing sellers. . .The fact is that resource destroyers are able to do it with no apparent problem at all. And if they remain the only ones competing for the resource, they’re the ones that are going to win, hands down.”

The logic seems persuasive. It’s worth noting, however, that although Rice and Hardner suggest there are fortunes available for concessions, the only money that has materialized so far has all come from the Moore Foundation, raising some questions about the tactic’s sustainability.

Furthermore, despite their dogged efforts, Rice and Hardner have yet to launch a concession in an area where they faced competition for environmental resources, a situation that applies to the Earth’s “hot spots” by definition. In addition to the nonstarter in Guatemala is the case in Cameroon, where Conservation International spent two years and US$25,000 from the Global Conservation Fund to put together a concession project for a biologically rich and threatened forest. Following that investment of money and time, which included legal and biological research, a site visit, and discussions with stakeholders, Rice said the Fund last spring “indicated informally that they would probably not approve funds for additional planning in the absence of more specifics.” Rice concluded the project was “just too expensive for us to fund without additional support” and that it was time to move on to more promising opportunities.

There are also questions concerning the fate of people living in the concession areas such as what if the deals create foreign-funded welfare states? To be sure, as Rice and Hardner note, this problem isn’t worryingly relevant in the up-and-running sites in remote Peru and Guyana, where not much economic activity was taking place before the concessions were established. There, the concessions payments have been adding net, if minimal, economic activity. Yet it would seem that in areas with more serious economic competition, concessions would have to offer more attractive packages of benefits, such as higher payments and social programs.

And that leads to another question: wouldn’t such benefits attract new immigrants? Hardner says if migrants were drawn to concessions areas, the legal owners would keep them out. Yet this begs the questions of how difficult that might be and what kinds of conflicts might ensue. “You could get a kind of Murphy’s law effect,” notes Randy Curtis, a conservation finance expert at The Nature Conservancy who basically supports the concessions idea.

The most serious outstanding question is how the conservation investments will be monitored. So far, in Peru, Guyana, and the two projects in Mexico, the people in charge of reporting on the effectiveness of the investments are the people with the greatest stake in the project’s success: the concessions owners and the governments receiving their payments. This raises an obvious credibility problem, one compounded by the fact that governing institutions are generally so weak in the countries hosting the concessions. The question becomes much more serious if for-profit firms buy concessions and seek to monitor their own henhouses.

To address that dilemma, Rice says he has been in talks with the Forest Stewardship Council to try to arrange third party certification of future conservation concessions. Yet in the meantime, any reported results from the Guyana and Peru projects are open to question, in the midst of critics’ charges that the concessions approach is being oversold.

In reality so far, and whatever their intentions, Hardner and Rice have something very different from conservation at “warp speed.” If anything, the concessions in Peru and Guyana, plus the projects in Mexico and the attempt in Guatemala, show that each site has offered its own set of complications. At every site, the plan that has ultimately been offered has also included some “sustainable development” component, such as the ecotourism plan in Guyana and the scholarships in Peru. Although cash payments certainly would seem to inspire cooperation, there’s still no evidence that cash alone can do the trick.

In the next few years, the concessions process may well speed up, especially if Hardner and Rice, as they say they plan to do, manage to convince other governments to follow Peru’s course and specifically allow concessions in their laws. But even then, the devil will be in the details. And many more devils are certain to pop up as concessions are more widely attempted.

BUTTERFLIES, SOIL & PARROTS: A SAMPLING OF OTHER CONSERVATION PAYMENT PROGRAMS

When you focus on the broad idea of paying people to conserve land, it’s clear that the oldest effort to do so is the U.S. government’s multibillion dollar payments to farmers to set aside cropland. These funds have been disbursed off and on since the Dust Bowl years but were increased and made continuous with the Crop Reserve Program, a part of the 1985 Farm Bill. Throughout its existence, the program’s main goal has been to prevent surpluses of certain crops. Yet since 1990, more funds have been directed toward environmental goals, such as preserving soil quality, wetlands, habitats, and floodplains.

Although these efforts are increasing, they’re still a small part of the program, according to Tim Searchinger, codirector of the Center for Conservation Incentives at Environmental Defense, who calculates that only 2 million acres of the 33 million acres set aside are considered truly environmentally significant. “There’s still a kind of welfare ethos that permeates the program,” he says. “The key questions for the future are how much more land will be targeted to restore ecosystems, and how good the monitoring will be for results.” To date, several experts said, there has been very little significant monitoring of environmental achievements.

Turning to the Tropics, two recent much smaller but landmark projects in Mexico have more in common with the model that Hardner and Rice want to replicate on a grand scale.

One is a 15-year contract, signed in early 2000, between the Wildlands Project, based in Richmond, Vermont, five Mexican NGOs, and a land cooperative whose members pledged to protect old-growth forest in the Sierra Madre Occidental mountains of northern Chihuahua. The forests provide nesting sites for half of the world’s remaining Thick-billed parrots (Rhynchopsitta pachyrhyncha). The agreement is unprecedented as the first contract between NGOs and a land cooperative, or ejido. There is no government involvement.

The ejido agreed to surrender its rights to log the area in return for cash and benefits amounting to about half of what it might have earned from timber. Prior to the agreement, some 2,400 hectares of forest had been scheduled for logging by 2002.

Leanne Klyza Linck, executive director of the Wildlands Project, says the program has been an “absolute success” since local logging has stopped, and the parrots appear to be thriving. In mid-May, one of the green and red parrots was sighted in New Mexico for the first time in many years. The only unfortunate news is that one ejido member who had been paid US$1,000 to build cabanas for ecotourists disappeared with the money, leaving the job incomplete. “We’re learning a lot about trust and taking a chance,” said Manuel Bujanda, Wildlands’ Chihuahua representative.

The second Mexican project, just as novel and even more ambitious, is focused on protecting pine, oak, and fir forests in the central states of Mexico and Michoacan, where Monarch butterflies (Danaus plexippus) that migrate from Canada and the United States spend the winters.

The strategy is to offer conservation incentives to residents of the Monarch Butterfly Biosphere Reserve, a 56,259-hectare area protected by law in 1986 and expanded in 2000. The residents never received compensation for lost logging income when the reserve was created, but since December of 2000, landowners have been paid to retire logging permits, while community members agreeing to protect forest in the core zone of the protected area have been receiving US$12/hectare per year. The payments come from a US$6.5-million Monarch Butterfly Conservation Trust Fund, whose main contributor is the Packard Foundation, together with Mexican government donors. World Wildlife Fund (WWF) Mexico manages the program, and the government has reportedly strengthened enforcement of the logging ban.

Despite these measures, some logging is continuing even in the core area of the reserve, where it is totally forbidden, with additional heavy cutting in the buffer zones, where it is restricted, according to a WWF report issued last February. WWF officials were unable to provide specific answers about the extent of the logging or why it was continuing, saying both questions were still under study. But they stressed that they believed that resident community members were cooperating with the agreement and that the logging was being done by “outsiders.”

Editor’s Note:

As this article goes to press, CI informs us that new developments are taking place that may reopen negotiations between CI, the communities, and the Guatemalan government to implement conservation incentive agreements there.

Further Information:

The Peruvian Concession</em> managed by Amazon Conservation Association:
Area Covered: 135,000 hectares
Cost: US$5 million (first five years)
Term: 40 years, with a renewable lease
Concession Owner: Amazon Conservation Association
Location: Madre de Dios Province, Peruvian Amazon
Date Launched: July 2001
Goals: Protect a biodiversity-rich area near Manu National Park

The Guyanese Concession managed by Conservation International:
Area Covered: 80,000 hectares
Cost: US$200,000 for the first year, including startup costs
Term of Agreement: 30 years
Concession Owner: Conservation International
Location: Alongside the Essequibo River, southern Guyana
Date launched: July 2002
Goals: To form a key part of the Guianas Tropical Wilderness Corridor

About the Author:

Katherine Ellison is a freelance writer based in San Anselmo, California. She is co-author of The New Economy of Nature: The Quest to Make Conservation Profitable (Island Press/Shearwater Books, 2002) Recently, she has been specializing in writing about how human beings are managing and mismanaging environ-mental resources.

Illustration © Janusz Kapusta/SIS

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